Thursday, August 30, 2012

Spanish bad bank loans soar to fresh high - (www.telegraph.co.uk) Spanish bad bank loans soared
to a fresh high in June, with almost 10pc of households and companies now
behind on their payments. Bad debts climbed to 9.42pc of total lending, the Bank of Spain said on Friday, the
highest since records began in 1962. The data showed that €164.4bn of loans
were more than three months past their repayment deadlines.A month earlier, the
bad loan rate was 8.96pc.

Insight: Goldman independent research arm dies, shunned by
clients - (www.reuters.com) Goldman Sachs Group Inc has
given up trying to sell research from independent analysts to its institutional
clients, after spending millions of dollars on distribution only to find that
big money managers had little interest. The bank has laid off or reassigned the
dozen or so employees at its Hudson Street Services unit, which offered data
and independent research to investors. Goldman also sold its minority stakes in
most firms that were producing the research, generating an overall profit in
the process.

Lack of Bond Liquidity Hurting European Investors, Fitch Says
- (www.bloomberg.com) Investors are concerned about
a lack of liquidity in Europe’s corporate bond market as banks cut
back on trading and fund managers hold on to securities for longer. Two-thirds
of participants in a Fitch Ratings survey published today reported reduced
corporate bond liquidity since the start of the euro crisis. The same is true
in the U.S., where trading volumes averaged $9.97 billion last month, 8 percent
lower than in July 2011, according to data from the Financial Industry
Regulatory Authority. “It’s something that’s not going away and if it’s already
taking place in the U.S., where the market’s much more liquid and mature than
Europe, then we’re in trouble,” said Adriaan Klop, a fund
manager at Bryan Garnier Asset Management Ltd. in Paris.

New rules expose bigger funding gaps for public pensions -
(www.washingtonpost.com) Already-strapped state and
local governments are coming under increasing pressure to reduce pension
benefits or increase taxpayer contributions that help pay for them because of
new rules that would require them to report those obligations more honestly, advocates
say. The latest rules come on line from the bond-rating firm Moody’s at the end
of this month. They are projected to triple the gap between what states and
municipalities report they have in their funds and what they have promised to
pay out to retirees. That hole would stand at $2.2 trillion. For the worst-off
cities, the new pension debt calculations could mean bond rating downgrades and
increased borrowing costs when localities try to raise money for new projects,
Moody’s has warned.

Drought
Sparks Battle Over Ethanol Quotas – (www.cnbc.com)
Three big intertwined but
rival agribusinesses — corn farmers, meat and poultry producers, and biofuel
refineries — are in a political fight to protect their interests as a drought
ravages corn producers and industrial consumers alike. At issue is whether to
suspend a five-year-old federal mandate requiring more ethanol in gasoline each
year, a policy that has diverted almost half of the domestic corn supply from
animal feedlots to ethanol refineries, driven up corn prices and plantings and
created a desperate competition for corn as drought grips the nation’s farm
belt. Meat producers are demanding that the Obama administration waive the
ethanol quota to ease rising feed prices. But ethanol producers worry that the
loss of the quota will undermine the ethanol industry and do little for corn
farmers but drive down the price of their stunted harvest.

Wednesday, August 29, 2012

China’s Largest Broker Plunges on Rumors Over Losses - (www.cnbc.com) Shares of Shanghai-listed Citic Securities,
China’s largest brokerage firm, fell by 9.1 percent on Monday after rumors the
company had suffered a large 2.9 billion yuan ($460 million) loss on overseas
trading. But a spokesperson for the company denied the rumors and told CNBC
that reports the company’s chairman had been arrested by the police were also
untrue. The drop in Citic’s shares also affected other brokers on Monday with
shares of Haitong Securities falling 8.6 percent. Reuters reported that traders
were worried over earnings in the latest quarter.

California
Sales Tax Collections Plunge an Amazing 40% in July - (globaleconomicanalysis.blogspot.com)
Typically, July is a month when California revenues go on vacation, as the
month accounts for about one dollar of every $20 deposited in the General Fund.
(Only October has lower revenue volume.) Despite those low expectations, July’s
revenues were $475 million, or 10.1%, below estimates. Some of that variance
may be due to timing, as a fund transfer expected in July will now be made in
August (in the range of $100 million). Most of the shortfall was attributable
to sales tax, which dropped $295 million, or 33.5%, below estimates. Partially
offsetting these revenue losses, the state’s other major revenue sources —
income and corporate taxes — performed above estimates.

Worst drought since 1956 - (www.washingtonpost.com) Driving by a boat ramp one Saturday morning
last month, a local man noticed some white spots on the Des Moines River. He
stopped to have a look. Turns out the spots were fish bellies. The undersides
of dead sturgeon formed glistening constellations in the muddy brown water. In
all, about 58,000 dead fish were along a 42-mile stretch, according to state
officials, and the cause of death appeared to be heat. Biologists measured the
water at 97 degrees in multiple spots. “I’ve never seen anything quite like
it,” said Justin Pedretti, who owns a farm near the boat ramp in Bonaparte,
Iowa, and first reported the fish kill. Under the most wide-reaching drought since 1956, and
torched by the hottest July on record dating from 1895,
the United States has been under the kind of weather stress that climatologists
say will be more common if the long-standing trend toward higher U.S.
temperatures continues.

Five years on, the Great Recession is turning into a life
sentence - (www.telegraph.co.uk) Five years into the Long
Slump it almost seems as if we are back to square one. China is sufficiently
alarmed by the flint hardness of its "soft-landing" to talk up
trillions of fresh stimulus. The European Central Bank is preparing to print “whatever
it takes” to save Spain and Italy. Markets are pricing in an
80pc chance of yet more printing by the US Federal Reserve in September or soon
after. There is no doubt that the three superpowers acting in concert can
launch a mini-cycle of growth early next year - assuming they deliver on their
rhetoric - but the twin headwinds of debt-leveraging and excess manufacturing
plant across the globe cannot easily be conjured away.

Going after Wall Street - and watching the clock - (money.cnn.com) If prosecutors want to go after Wall Street
for its role in the financial crisis, they better watch the clock: The statute
of limitations for many federal offenses is just about up. For securities fraud
and most other federal offenses, prosecutions must begin within five years, and
the subprime lending bubble hit its peak in 2007. "The statute is already
becoming a concern in a broad range of cases," said Bill Black, a law
professor at the University of Missouri-Kansas City. Federal officials,
however, have a number of ways around this problem. For starters, they could
pursue "tolling agreements" with the firms or individuals under
investigation. In these agreements, the subjects of investigation agree to have
the statute of limitations extended, and can earn more lenient treatment in
return.

Tuesday, August 28, 2012

No
Criminal Case Is Likely in Loss at MF Global - (www.cnbc.com) A criminal investigation into the collapse of
the brokerage firm MF Global and the disappearance of about $1 billion in
customer money is now heading into its final stage without charges expected
against any top executives. After 10 months of stitching together evidence on
the firm's demise, criminal investigators are concluding that chaos and porous
risk controls at the firm, rather than fraud, allowed the money to disappear,
according to people involved in the case. The hurdles to building a criminal
case were always high with MF Global, which filed for bankruptcy in
October after a huge bet on European debt unnerved the market.

Muni
Defaults May Be 36 Times More Frequent Than Reported - (www.bloomberg.com) Municipal bond defaults occur with a frequency
at least 36-fold greater than reported by credit raters, Federal Reserve Bank
of New York researchers say. When including unrated
debt not covered by the firms, 2,521 issuers in the $3.7 trillion market for
state and local bonds defaulted from 1970 to 2011, authors Jason Appleson, Eric
Parsons and Andrew Haughwout wrote today in a blog posting.
That compares with 71 reported by Moody’s Investors Service for issues it rated
over the period. “Although the low default history of municipal bonds has
played a key role in luring investors to the market, frequently cited default
rates published by the rating agencies do not tell the whole story,” the
researchers wrote.

Spain Said To Speed EU Bank Bailout On Collateral Limits -
(www.bloomberg.com) Spain is
about to receive an emergency disbursement from the 100 billion-euro ($123
billion) bailout of its financial system because of restrictions the European Central Bank imposed on bank
borrowing, according to a person familiar with the matter. The ECB last month imposed limits on
how much it will lend banks against government-guaranteed bonds. The rule
change meant Spain had to ditch a plan for nationalized lender Bankia group to
get a loan from the Frankfurt-based central bank, said the person, who asked
not to be named because the matter is private. Bankia group, formed in 2010 from the
merger of Spain’s troubled savings banks, will now get the first portion of the
country’s European Union cash imminently, the person said. The rescue program
always included a 30 billion-euro tranche to be paid out first and “mobilized
in any contingency,” according to the agreement document dated July 16.

Risk Builds as Junk Bonds Boom - (www.nytimes.com) Money market funds pay next
to nothing. Interest rates on United States Treasuries are dismal. The volatile
stock market has been dead money for more than a decade. But on Wall Street —
as the old saying goes — somewhere, someone is making money. And these days,
that somewhere is junk bonds. The market for junk bonds, risky corporate debt
that pays high interest rates, is red hot. Such debt, also known as high-yield
bonds, has returned 10.2 percent year-to-date, according to a JPMorgan high-yield index. Junk bond
funds are on a pace to take in a record amount of money this year. Companies
with less than stellar credit are issuing hundreds of billions of dollars of
bonds. Fueling this frenzy are investors of all stripes — including
individuals, mutual funds and state pensions — who
are desperate for returns in their bond portfolios and willing to take more
risk to get them. Demand is insatiable, even as analysts warn that the market
has become overheated and is ripe for a fall.

'Cliff'
Hanger: US Companies Putting Everything on Hold - (www.cnbc.com) Company executives are postponing decisions
such as hiring and plant-building until they can get some clarity from
Washington on the looming “fiscal cliff” and possible higher taxes, according
to an analysis of earnings conference calls by Goldman Sachs. “Regulatory direction and political uncertainty remain key
concerns to corporate leaders,” wrote David Kostin, a Goldman strategist, in
the note. “Firms expressed a uniform desire for regulatory clarity.”

Monday, August 27, 2012

Winfield considers ending police force - (www.chicagotribune.com) West suburban Winfield is considering
dismantling its police force to save money it could use to repair its crumbling
roads. Consultants Laurence Mulcrone and Daniel McDevitt prepared a study for
the village of 9,000 on the advantages and downfalls of scrapping its 19-member
police force and contracting with DuPage County to use sheriff's police for law
enforcement. Adopting the plan won't happen easily or quickly. Residents have
publicly balked at the idea, first pitched this year by officials looking to
repair the village's notoriously failing roads.

UC
payroll up 6 percent See who made $1 million or more - (www.sacbee.com) The University of California spent more on
payroll in 2011 than in the prior year, though officials say the money for
higher salaries is coming more from hospital fees than from rising tuition. UC's
total payroll grew by 6 percent last year, from about $10 billion in 2010 to
$10.6 billion in 2011, according to salary data the university released today. "This
increase is likely attributable to a combination of factors, including
restoration of furlough reductions, increased research activity and market
pressures for more competitive compensation, particularly in the areas of health
care, instruction and research," says the university's employee pay report. About 36 percent of
the funding for compensation in 2011 came from fees at UC hospitals, the report
says, while less than 26 percent came from general funds and tuition, down a
percentage point from 2010. UC had 22 employees statewide who made at least $1
million in 2011 - mostly doctors and coaches. Scroll over the blue bars below
to learn more about them:

Obamacare
may expose immigrant status of millions - (www.gmanetwork.com) As she was ushered into
surgery eight years ago, Paula was confident that doctors at Washington's
Howard University Hospital would find the cancer that had been growing in her
right breast for months. She was less certain about where she would wake up the
next day. "I felt scared because of the stories in other states ... It was
always in the back of my mind that a doctor, or an immigration officer dressed
as a doctor, could take me," said Paula, 60, of the fear that she would be
exposed as an undocumented immigrant and deported. Still cancer-free, Paula,
who asked to have her last name withheld, waits in the tiny chapel of La
Clinica Del Pueblo, a community health clinic in Washington, DC, where she
receives routine care. She and other illegal immigrants worry that their
ability to access healthcare at facilities like La Clinica will become even
more risky once President Barack Obama's healthcare law takes effect.

For
Unpaid College Loans, Feds Dock Social Security - (www.smartmoney.com) It's no secret that falling
behind on student loan payments can squash a borrower's hopes of building
savings, buying a home or even finding work. Now, thousands of retirees are
learning that defaulting on student-debt can threaten something that used to be
untouchable: their Social Security benefits. According to government data,
compiled by the Treasury Department at the request of SmartMoney.com, the
federal government is withholding money from a rapidly growing number of Social
Security recipients who have fallen behind on federal student loans. From
January through August 6, the government reduced the size of roughly 115,000
retirees' Social Security checks on those grounds. That's nearly double the
pace of the department's enforcement in 2011; it's up from around 60,000 cases
in all of 2007 and just 6 cases in 2000.

Foreclosure
counseling is a bureaucratic waste that should be eliminated - (www.ochousingnews.com) The House passed a 2013 HUD
appropriations bill in June allocating $45 million to housing counseling, $10
million less than HUD requested. The bill is now stalled in the Senate, and the
White House has said President Barack Obama plans to veto the bill if passed in
its current form. … “The housing counseling community needs to work to restore
federal funding,” said David Berenbaum, chief program officer for the National
Community Reinvestment Coalition. “Housing counseling organizations have had to
downsize across the country at a time when the demands on service are at an
all-time high.” They should be downsized out of existence. These services are
part of the amend-extend-pretend charade. Banks need to foreclose on these
people and be done with it. Most of these people have been struggling for five
years. At this point, a foreclosure is a mercy killing.

Sunday, August 26, 2012

Blink! U.S. Debt Just Grew by $11 Trillion - (www.bloomberg.com) Republicans and Democrats
spent last summer battling how best to save $2.1 trillion over the next decade.
They are spending this summer battling how best to not save $2.1 trillion over
the next decade. In the course of that year, the U.S. government’s fiscal gap
-- the true measure of the nation’s indebtedness -- rose by $11 trillion. The
fiscal gap is the present value difference between projected future spending
and revenue. It captures all government liabilities, whether they are official
obligations to service Treasury bonds or unofficial commitments, such as paying
for food stamps or buying drones. Some
question whether “official” and “unofficial” spending commitments can be added
together.

Three
California cities' bankruptcy cases reverberate - (www.sacbee.com) The back-to-back bankruptcy filings of Stockton
and San Bernardino, following Vallejo's
insolvency a few years earlier, have sparked finger-pointing about causes and
speculation about whether more cities may go under. Those on the political
right say the bankruptcies resulted from local politicians' caving in to
pressure from unions for higher pay and more generous pension and health
benefits. Those on the left – unions particularly – contend that the collapse
of the real estate market, caused by rapacious Wall Street bankers, is to
blame.

BNP Fund Freeze Shrinks Holdings Five Years After Crisis
Ignited - (www.bloomberg.com) When a Brookfield Investment
Management Inc. analyst saw bonds of Accuride Corp., the wheel manufacturer in
Evansville, Indiana, at 94 cents on the dollar in December, he decided it was
time to buy. The problem was the price wasn’t real. The debt was only available
at 104 cents. “When it actually came time to shake them loose from somebody’s
hands, that’s where the disconnect came in,” said Richard Cryan, co-manager of
high-yield corporate debt at the New York-based firm, which oversees $150
billion of assets. Unable to find a seller at the lower price, they gave up. Five
years after BNP Paribas SA (BNP) marked
the start of the worst financial crisis since the Great Depression by halting
withdrawals from three investment funds that owned subprime mortgage
securities, repercussions are lingering in the credit markets. What investors
see still isn’t what they can get.

Forty
Million Houses in the US That No One Needs? - (www.thedailybell.com) 40 million houses too many
... one explanation for falling prices ... America has too many big houses – 40
million, to be exact – because consumers are shifting preferences to condos,
apartments and small homes, experts told the New Partners for Smart Growth
Thursday, holding its 11th annual conference in San Diego through Sunday.
Relying on developers' surveys, Chris Nelson, who heads the Metropolitan
Research Center at the University of Utah, said 43 percent of Americans prefer
traditional big, suburban homes but the rest don't. "That means we are out
of balance in terms of where the market is right now, let alone trending toward
the future," he said. He estimated that this demand suggests a need for 10
million more attached homes and 30 million more small homes on
4,000-square-foot lots or less.

Former ECB Chief Economist Warns Against Trying to Blackmail
Germany With History - (online.wsj.com)
Germany’s guilt over the
Second World War doesn’t oblige it to write blank checks to euro-zone countries
that fail to reform their economies, said former European Central Bank executive
board member Otmar Issing. Mr. Issing served as a member of the ECB’s Executive
Board from 1998 to 2006. A German, he remains an influential voice on economic
and central bank matters in his home country. Since leaving his ECB post he has
served as an adviser to his government on financial and economic matters.

Thursday, August 23, 2012

Real
estate bubble bursts for California lawmakers too - (www.latimes.com) In the boom years, several
California legislators bought homes but are now having trouble keeping up with
mortgages or avoiding big losses. State lawmakers typically keep modest
quarters near the Capitol to use when they're in town, with help from their
tax-free expense allowance of $28,000 a year. Assemblyman Tony Mendoza bought a
three-bedroom home instead, paying $463,000 for it after his 2006 election. "If
you bought property, property values would go higher," said the Democrat,
whose main home is in Artesia. "So I figured as soon as I get there
[Sacramento], I will buy the house." But now he is one of at least 10
legislators who didn't fare well in a real estate climate that once showed no
sign of cooling. The housing market tanked, the recession lingered and
legislators' pay was cut. Unlike some predecessors who made handsome profits on
second residences in Sacramento or in their districts before the downturn,
these lawmakers have found themselves unable to pay their mortgages or stuck
with homes that would sell at a loss, or both.

Despite Record Fraud Payouts,
Most Execs Avoid Jail - (www.cnbc.com) Pharmaceutical companies,
military contractors, banks and other corporations are on track to pay as much
as $8 billion this year to resolve charges of defrauding the government,
analysts say — a record sum and more than twice the amount assessed last year
by the Justice Department. The surge in penalties is
because of a number of factors, including the resolution of longstanding
actions against drug makers and military contractors, as well as lawsuits
brought against mortgage lenders after the financial crisis. But it also
reflects a renewed emphasis on corporate fraud, as the Justice Department
devotes more resources to the issue and demands higher penalties from
companies.

Emerging Markets Experiencing Capital Outflows - (www.reuters.com) There's always something
comforting about dining in a restaurant where locals are eager to eat. Yet even
as foreign investors pile back into emerging markets this year - searching for
growth, yield and sovereign credit stability so elusive in the big developed
markets these days - there is something unnerving about seeing domestic capital
spinning out the same revolving door in some countries. Russia's deputy economy
minister Andrei Klepach said on Monday the government may double its existing
2012 net capital outflow forecast to $50 billion, and even that's still below
private forecasts of a $65 billion drain. Although more modest than last year's
outflow of $80.5 billion and well under the worst moments of the 2008/09 credit
shock, domestic money continues to exit the country at a brisk pace.

Wednesday, August 22, 2012

ECB’s Rescue Worsens Spain, Italy Maturity Crunch: Euro Credit
- (www.bloomberg.com) European Central Bank President Mario
Draghi’s bid to bring down Spanish and Italian yields may spur the
nations to sell more short-dated notes, swelling the debt pile that needs
refinancing in the coming years. Yields on Italian and Spanish two-year notes plunged after
Draghi said on Aug. 2 the ECB may buy debt on the “short-end of the yield
curve” as part of a broader crisis-fighting plan. The gap between Spain’s two-year
and 10-year yields rose on Aug. 6 to the widest in at least two decades, while
the spreadbetween similar Italian securities
also approached a record. The average maturity of Spanish debt is the shortest
since 2004 as Spain, like Italy, hasn’t issued 15- or 30-year bonds
all year. As Prime Ministers Mario
Monti and Mariano Rajoy fight to avoid bailouts that may
threaten the euro’s survival, the ECB’s plan risks adding to pressure on the
two nations’ treasuries.

Recession Generation Opts to Rent Not Buy Houses to Cars -
(www.bloomberg.com) The day Michael Anselmo
signed a lease on his first apartment in New
York City, he lost his job at Buck Consultants LLC. He spent about
10 months struggling to pay rent with unemployment benefits. Two years later he’s
still hesitant to buy a home or even a road bike. “Every decision that I have made since I lost
my job has been colored by that insecurity I feel about the future,” said
Anselmo, 28, who now rents an apartment in Austin, Texas, and works as a
consultant for UnitedHealth Group Inc. “Buying a house is just further out on the
timeline for me than it used to be.” Anselmo and many of his peers are wary
about making large purchases after entering adulthood in the deepest recession
and weakest recovery since World War II. Confronting ajobless rate above 8 percent since
2009 and student-loan debt hitting about $1 trillion, 20-to-34-year-olds are
renting apartments, cars and even clothing to save money and stay flexible.

‘Les Riches’ in France Vow to Leave if 75% Tax Rate Is Passed
- (www.nytimes.com) The call to Vincent Grandil’s
Paris law firm began like many others that have rolled in recently. On the line
was the well-paid chief executive of one of France’s most profitable companies,
and he was feeling nervous. President François
Hollande is vowing to impose a 75 percent tax on the portion of
anyone’s income above a million euros ($1.24 million) a year. “Should I be
preparing to leave the country?” the executive asked Mr. Grandil. The lawyer’s
counsel: Wait and see. For now, at least. “We’re getting a lot of calls from
high earners who are asking whether they should get out of France,” said Mr.
Grandil, a partner at Altexis, which specializes in tax matters for
corporations and the wealthy. “Even young, dynamic people pulling in 200,000
euros are wondering whether to remain in a country where making money is not considered
a good thing.”

Loan-Shark Lending Surge Feared in Japan - (www.bloomberg.com) Toyoki Yoshida recalls the
winter day in 2002 when he tried to hang himself with a leather belt after
yakuza thugs hounded him for weeks to pay back 500,000 yen ($6,300) in loans. The
belt ripped as his neck strained the noose, saving his life. The loans, with interest rates as high as 5,000
percent annually, were among those Yoshida owed to 96 loan sharks --some with
connections to organized crime. Working in the billing department of a Tokyo electronics
company, he’d been borrowing from consumer-finance companies to entertain
clients and colleagues and fell into a spiral of debt which cost him his job.
It ended when lawyers helped Yoshida terminate his contracts through a bankruptcy filing and partial
payments.

Greece’s Rating Outlook Lowered By S&P As Economy Weakens
- (www.bloomberg.com) Greece’s
credit rating may be cut again by Standard & Poor’s on concern the
debt-burdened nation will need more support from European Union lenders. The
outlook on Greece’s CCC rating, already eight levels below investment grade,
was revised to negative from stable, S&P said in a statement yesterday. The
change reflects the risk of a downgrade if Greece is unable to obtain its next
disbursement of bailout loans from the EU and International Monetary Fund
rescue package, the rating company said. Representatives from the so-called
troika of the European Commission, European Central Bank and IMF return
to Athen
searly next month to review Greece’s economic program, which will
determine whether the nation will receive further funds from rescue packages,
amounting to 240 billion euros ($297 billion), needed to remain in the
17-nation euro area.